Administration September 16, 2013

Ranking Shows Wisconsin Is Strongest State Pension

September 16, 2013 (PLANSPONSOR.com) – Morningstar’s municipal credit analysts found that, based on two key funding metrics, the state of Wisconsin has the strongest-funded state pension plan system while Illinois has the weakest among all 50 states.
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According to the 2013 edition of its research report, “The State of State Pension Plans,” Wisconsin’s funded ratio is 99.9%, a 0.1% increase from last year, and the liability per capita is $18, which fell $3 from 2012. Illinois continues to have the weakest-funded state pension system, with a 40.4% funded ratio, falling 3% since last year, and a liability of $7,421 per capita, an increase of more than $900 from 2012.

Puerto Rico’s pension system is weaker than Illinois’, with a funded ratio of 11.2% and a liability of more than $8,900 per capita. According to the commonwealth, all three of its pension plans are projected to deplete their assets over the next few years, but recently passed reforms may mitigate the losses.

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Twenty-six states and Puerto Rico fall below Morningstar’s fiscally sound threshold of a 70% funded ratio. Puerto Rico has the lowest funded ratio; 12 states have an aggregate funded ratio of 80% or more, led by Wisconsin for the second year in a row.

Morningstar’s pension plan analysis focused on two key metrics:

• Funded ratio: the ability of a pension plan to meet its obligations, which is calculated by dividing the pension plan’s assets by its liabilities, and

• Unfunded actuarial accrued liability (UAAL) per capita: the unfunded liability per capita, representing the amount each person in the state would need to pay to fully fund this unfunded liability.

Seven states have a UAAL of less than $100 per capita. Wisconsin has the lowest UAAL per capita for the second year in a row. Thirteen states have a UAAL of less than $1,500 per capita, which is Morningstar’s threshold for “Good” unfunded liability levels, and Alaska had the highest UAAL per capita for the second year in a row, currently more than $10,000.

The report also includes a discussion of trends, pension reform, recent bankruptcies, shortcomings in disclosure and transparency, and federal legislation. Morningstar analysts also compiled aggregate pension data by state, including assets, funded ratio and UAAL per capita, along with individual pension plan data by state.

An excerpt of “The State of State Pension Plans 2013” is available at http://global.morningstar.com/Pensions2013. For a video and article highlighting this year’s research findings, please visit http://morningstar.com/goto/StatePension. For more information about Morningstar’s analysis of government pension plans, the company’s “State and Local Pensions 101” overview is available at http://global.morningstar.com/pensions101.

Benefits September 16, 2013

Employees Asking Questions About Health Reform

September 16, 2013 (PLANSPONSOR.com) - Ninety percent of employers polled said they have received questions from employees asking how their benefits will be impacted by health care reform.
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According to the latest employer member survey conducted by the nonprofit Midwest Business Group on Health (MBGH), responding employers have found employees are most concerned about the impact of the Patient Protection and Affordable Care Act (PPACA) on their benefits (64%), whether their out of pocket costs will go up (63%) and knowledge about the exchanges (53%). “There are key questions employees have that need to be addressed now, such as the status of their current benefits and their eligibility to obtain tax credits and subsidies through the new marketplaces. Most employer efforts are focused in these areas for the upcoming rollouts this fall,” said Larry Boress, MBGH president and CEO.

Key areas of focus for employers moving forward in complying with the PPACA are the education of employees about the PPACA (71%), benefit design options to reduce exposure to excise tax (59%) and incentives for wellness provisions (49%). Nearly 70% of employers are developing their own PPACA messaging, with few relying solely on their health plan. The types of information being communicated include open enrollment options, an overview of the PPACA and its impact on benefit programs.

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About 90% of self-funded employers indicated they do not plan to move any of their covered population to either public marketplaces or private exchanges in the immediate future. During this time, employers will review what peer businesses are doing and the success and viability of the exchanges. 

 

Over the next four years, employers indicated they will offer more high deductible health plans and decrease the number of health maintenance organizations, point of service plans and preferred provider organization options. There is uncertainty about the number of employers planning to offer only high deductible health plans.

More than 70% of responding employers indicated they will not increase salaries for employees who obtain insurance coverage from the public marketplaces.

The online survey of employers’ views on health reform was conducted in June and July 2013. There were more than 40 respondents from a variety of industries representing self-insured and fully-insured employers. The respondents ranged in size from very large employers (54% with more than 10,000 employees), to large (12% with 5,001 to 10,000), to mid-size (31% with 5,000 to 501) and small (3% with less than 500).

More information about the survey is here.

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